Last update: 30.11.2024 08:16 (GMT+2)
Eesti Telekom FINANCIAL RESULTS 04/24/2003 09:00
RESULTS OF THE 3 MONTHS OF 2003, EEK
24 April 2003
THE FINANCIAL RESULTS OF THE FIRST THREE MONTHS OF 2003
Eesti Telekom, the leading provider of telecommunication
services in Estonia, hereby announces its results for the
three-month period, which ended 31 March 2003.
Financial highlights
3 months 3 months Change, %
2003 2002
Total revenues, meek 1,106 1,049 5
EBITDA, meek 540 507 7
EBITDA margin, % 49 48
EBIT, meek 311 250 24
EBIT margin, % 28 24
Profits before taxes, 319 251 27
meek
Net profits for the 39 251 -84
period, meek
EPS, EEK 0.28 1.82 -84
No. of A- shares 137,383,178 137,383,178
Investments, meek 43 80 -46
Net gearing, % -34 -16
ROA, % 3 23
ROE, % 32 27
Commenting on these financial results, Chairman Jaan
Männik stressed:
"The year started well for Eesti Telekom."
For further information, please contact:
Krister Björkqvist +372 6272 465
CFO
Hille Võrk +372 6272 460
Financial Manager
CHAIRMAN’S STATEMENT
A break-through is being made in the development of the
Eesti Telekom Group companies.
When AS Eesti Telefon was created in 1993, 146,000 people
were waiting to be provided with a telephone connection,
i.e. almost every tenth inhabitant of Estonia. By 28
February 2003, this waiting list had been eliminated.
Fast developments in the area of mobile communications
have created the situation where many private individuals
are giving up their fixed lines. Fixed phones are still
indispensable for business customers. The number of main
lines used by business customers continued to grow in the
first quarter of 2003. However, the decreasing volume and
revenues of voice communication are increasingly
compensated for by Eesti Telefon’s success in the area of
data communication. During 2002, the number of users of
Eesti Telefon’s Atlas ADSL permanent connections almost
doubled. The ADSL start-up packages launched in stores at
the end of the year have accelerated the growth in the
number of connections in 2003 even further. By now,
Estonia is among the leading countries not only in
Europe, but in the whole world, in the field of ADSL
penetration. Eesti Telefon is already taking the next
steps - the company supports computer training, the
introduction of ID-cards and the electronic signature,
and promotes remote working facilities.
Mobile penetration in Estonia exceeded 60 % in 2002. This
is a very high rate considering Estonian living
standards. But the addition of new customers has slowed
down. Operators are, rather, taking over competitors’
customers by offering more favourable tariffs or
contracts. AS EMT has, over the years, been oriented more
on offering the most innovative services, rather than the
lowest prices. Therefore, a wide variety of additional
services has secured for it a continuous growth of SMS
volume. The number of GPRS-users is growing fast. In
2003, the company is intending to acquire the third
generation mobile communication license.
Changes in the development trends of the
telecommunication market have not threatened the
financial position of the Eesti Telekom Group. The EBITDA
margin of the Group reached 49% in the first quarter of
2003. The cash flow was strongly positive. Net debt of
the Group amounted to -1,331 mln EEK, and net gearing was
-34%.
Revenues, expenses, and profits
During the first three months of 2003, consolidated
revenues of the Eesti Telekom Group amounted to 1,106 mln
EEK, showing an increase of 5% compared to the same
period in 2002. Operating expenses were 567 mln EEK, up
by 5%. The EBITDA of the Group showed an increase of 7%,
amounting to 540 mln EEK. The EBITDA margin reached 49%.
In 2003, Estonia started transition to the new Accounting
Law. The new law harmonizes Estonian "good accounting
practices" with International Financial Reporting
Standards. In connection with the transition, the
structure of an income statement has been amended.
"Change in work-in-progress" and "Capitalized self-
constructed assets" have been removed from "Revenue" to
"Operating expenses". Comparison data in 2002 was
calculated correspondingly. In accordance with the new
structure of an income statement, consolidated revenues
and expenses of the first three months of 2002 are lower
by 2 mln EEK, compared to the data published in 2002.
228 mln EEK were calculated as depreciation in the first
three months of 2003, a decrease of 11%, compared to the
same period in 2002. The decrease in depreciation is
mainly caused by new depreciation rates employed in AS
Eesti Telefon at the beginning of 2003. The new rates are
more differentiated than the previous ones. Therefore,
the presumed useful lifetime of different categories of
tangible assets is determined more accurately.
Financial revenues exceeded financial expenses by 8 mln
EEK in the first quarter of 2003 (Q1 2002: 0.2 mln EEK).
The majority of financial revenues consisted of interest
earned on cash balances of the Group.
The general meeting of the shareholders of AS Eesti
Telefon, that took place on 4 March 2003, decided to
distribute 200 mln EEK, out of the company’s net profit
for the year 2002, to its 100%-owner, AS Eesti Telekom.
The general meeting of the shareholders of AS EMT, that
took place on 4 March 2003, decided to distribute 600 mln
EEK as dividends to AS Eesti Telekom. Starting in 2003, a
resident company shall pay 26/74 income tax on all
dividends paid. In accordance with that, AS Eesti Telefon
has shown 69 mln EEK, and AS EMT has shown 211 mln EEK as
dividend income tax expenses in their income statements.
As a result of the high income tax expenses, the net
profit of the Eesti Telekom Group was 39 mln EEK (in the
corresponding three months of 2002: 251 mln EEK).
AS Eesti Telekom will propose to the general meeting of
shareholders the payment of 824 mln EEK, or 6 EEK per
share, to the shareholders, as dividends for 2002. When
the meeting approves the proposal, an income tax
liability will arise in the amount of 290 mln EEK. In
accordance with the Income Tax Law, AS Eesti Telekom can
treat the dividend income tax paid by subsidiary
companies as tax-credit. Therefore, AS Eesti Telekom can
reduce its 290 mln EEK tax liability by 280 mln EEK, paid
by subsidiary companies.
The consolidated revenues of the Eesti Telefon Group were
604 mln EEK, during the first three months of 2003, down
by 1% compared to the same period in 2002. Operating
expenses of the period amounted to 373 mln EEK, up by 2%.
The EBITDA of the Group was 231 mln EEK, down by 7%
compared to the same period in 2002. The EBITDA margin
reached 38%. Resulting from implementation of the new
depreciation rates, depreciation of the Eesti Telefon
Group, for the first three months of 2003, was down by
18%. Compared to the same period in 2002, interest
expenses were significantly lower. The net financing item
of the Eesti Telefon Group, in the first quarter of 2003,
was -1 mln EEK (corresponding 3 months in 2002: -9 mln
EEK). The pre-tax profit of the Eesti Telefon Group
amounted to 91 mln EEK, up by 31%, compared to the same
period in 2002. The net profit of the Group was 22 mln
EEK, as tax on dividends was accounted in the income
statement.
The operating revenues of AS Eesti Telefon, the parent
company of the Eesti Telefon Group, were down by 4%,
compared to the same period in 2002. Operating expenses
of the company were down by 3%. Among voice communication
revenues, the revenue from domestic calls decreased the
most, as much as 12%, compared to the same period in
2002. The decrease was mainly caused by competition with
mobile operators. Revenues from international calls and
calls into mobile networks are stabilizing. Both
categories were down by 2%. Revenues from installation
and monthly fees were lower by 6%, compared to the same
period in 2002. Revenue from Internet dial-up was down by
40%. At the same time, other revenues from Internet
connections were up by 50%, and total revenue from
Internet and data communication was up by 6%. The
company’s revenue from network services was down by 5%.
Revenue from IT-services was up by 35%.
The market shares of AS Eesti Telefon have been
continuously stable. The company estimates its share of
total call minutes, domestic call minutes, fixed to
mobile minutes, and international minutes to be 88%
(March 2002: 90%), 87% (89%), 74% (74%), and 68% (70%),
respectively. The estimated market share of dial-up
minutes is 95% (95%).
The total revenues of the EMT Group amounted to 610 mln
EEK, up by 13%. The operating expenses of the Group were
296 mln EEK, up by 7%. The EBITDA of the EMT Group was
313 mln EEK, up by 19%. The EBITDA margin was 51%.
Depreciation of the EMT Group was up by 3%, compared to
the same period in 2002. The net financing item of the
Group was 3 mln EEK. The pre-tax profit of the EMT Group
was up by 27%, compared to the first quarter in 2002,
amounting to 228 mln EEK. As tax on dividends, in the
amount of 211 mln EEK, was accounted in the income
statement of March, the net profit of the Group was 17
mln EEK.
AS EMT’s (the parent company of the EMT Group) revenues
in all main categories, except the monthly fees, were up
during the first three months of 2003. Revenues from SMS
and data continued to have the highest growth-rate. The
number of SMS, sent by AS EMT’s customers, has grown from
year to year. Revenues from SMS formed 5% of the net
sales of the company for the first three months of 2003
(corresponding 3 months in 2002: 4.4%).
The number of customers of AS EMT grew by 3.2 thousand by
the end of March 2003, as compared to the end of the year
2002. The total number of customers reached 430,700. The
number of contractual customers was up by 5.5 thousand.
The number of prepaid customers was down by 2.3 thousand.
Mobile penetration in Estonia exceeded 60% in 2002. The
market share of AS EMT is around 50%. Against that
background, some slow-down in the addition of new
customers is inevitable. At the same time, there is
noticeable customer interest in the new possibilities
that mobile communication can offer. AS EMT has been
always made it a point to be the most innovative operator
in Estonia. AS EMT was the first one to launch GPRS-
services in Estonia. During the last twelve months, the
number of GPRS-users has almost six-folded. The revenue
from GPRS has grown over seven times. The monthly ARPU
(monthly average revenue per user) in March 2003 was 423
EEK (March 2002: 421 EEK, December 2002: 423 EEK).
Balance sheet and cash flow
At the end of March 2003, the total assets of the Eesti
Telekom Group amounted to 4,641 mln EEK (December 2002:
4,441 mln EEK). Tangible assets were reduced, from the
beginning of the year, by 187 mln EEK. Current assets
were enlarged by 387 mln EEK. This enlargement was mainly
the result of an increase in cash and cash equivalents by
410 mln EEK. At the end of March 2003, the Group’s non-
current debt amounted to 20 mln EEK and current debt
amounted to 22 mln EEK (December 2002: 20 mln EEK and 36
mln EEK respectively). By the end of the period, net debt
of the Group amounted to -1,331 mln EEK, and net gearing
was -34%. Other current liabilities of the Group were up
by 174 mln EEK, including a 315 mln EEK increase in tax
liabilities. The majority of the increase in tax
liabilities was income tax calculated on dividends
payable by AS Eesti Telefon and AS EMT.
The balance of cash and cash equivalents of the Eesti
Telekom Group grew by 410 mln EEK during the first three
months of 2003. Net operating cash flow was 455 mln EEK
(corresponding 3 months of 2002: 376 mln EEK). Cash
outflow into investing activities was essentially smaller
than a year ago: 32 mln EEK in 2003, 71 mln EEK in 2002.
Cash outflow into financing activities was 13 mln EEK
(corresponding 3 months of 2002: 13 mln EEK).
Investments
The Eesti Telefon Group invested 19 mln EEK during the
first three months of 2003 (first three months of 2002:
35 mln EEK). The reduction in investments has been caused
by harsh weather conditions leading to projects being
postponed, and changes in accounting principles - small-
volume investments into equipment at customers’ locations
are written directly into expenses. The number of main
lines in use at the end of March was 460,888 (a
penetration of 34.0 lines per 100 people). The net
decrease in the number of main lines was 4,200. The
number of lines per employee was 329. The digitalisation
rate reached 77.4% by the end of March 2003.
The total number of Atlas ADSL connections was 34,659 at
the end of March 2003 (a penetration of 2.6 connections
per 100 people). During the last year, the ADSL-coverage
area has grown by one third, 200 populated points are
covered. An ADSL permanent Internet connection can be
installed to nine phone lines out of ten. Analysts from
Point-Topic, in their quarter four, 2002, report, placed
Estonia first, among Eastern European countries, on the
basis of DSL-penetration level. Estonia also exceeds
countries like Netherlands, Italy, and Great Britain.
According to the data of the DSL Forum, Estonia is in
second place, after Hungary, in Eastern Europe, on the
basis of the absolute number of DSL-connections. The ADSL
start-up packages launched in stores at the end of last
year make it possible for everyone to install an ADSL-
connection. Over 75% of the new ADSL-connections have
been installed using the start-up packages. AS Eesti
Telefon is intending to further accelerate the spread of
the ADSL-connections with the promotion of remote working
facilities.
On 29 December 2000, the agreement for the termination of
the concession agreement was concluded between the
Republic of Estonia and AS Eesti Telefon. The agreement
regulates some aspects of the relationship between the
company and the state until 1 January 2004. With the
agreement, AS Eesti Telefon accepted an obligation to
ensure that 95% of the applications for telephone
connections submitted to AS Eesti Telefon, after 28
February 2003, will be fulfilled within two weeks of the
payment of the invoice, and to eliminate, by 28 February
2003, at the latest, the waiting list of those who had
submitted applications before the concluding of the
agreement.
At the end of the year 2000, 24,290 people were waiting
for phones. By the end of February 2003, the waiting list
of subscribers, resulting from applications received
before the end of 2000, was eliminated. New applications
for fixed phone connection are fulfilled within 10
business days in 98% of the cases.
AS Eesti Telefon has participated on several public
tenders successfully. In October 2002, the company won
the tender for government procurement to supply a virtual
private network for the Estonian Land Board. The network
between the head office and 14 local offices of the Board
was established in February 2003. In February 2003, AS
Eesti Telefon won the tender for government procurement
to supply the server hosting service for the central
database of the Estonian libraries and the web-library.
The EMT Group invested 24 mln EEK during the first three
months of 2003 (corresponding 3 months of 2002: 45 mln
EEK). The majority of investments made by EMT went into
base stations and exchanges.
On 11 February 2003, the Riigikogu (Parliament) decided
that four third generation mobile communication licenses
would be issued for a ten-year period. At the first
stage, a direct offer will be made to the existing
licensed mobile operators in Estonia, with a fee of 70
mln EEK per license. The second stage will be an auction
of the licenses not issued during the first stage, with
an initial price of 70 mln EEK per license. A
precondition for the licensee will be the obligation to
establish, within seven years of the license issuance, a
third generation network covering at least 30% of the
Estonian population. The decision became effective on 17
March 2003. AS EMT, as an operator oriented upon
innovations, continues to be interested in acquiring the
license. The investment is budgeted to take place in
2003.
Relations with state regulators
The Communications Board started procedures in November
2002 to reduce the termination fees of calls made to
mobile networks. The Board analysed interconnection fees
of the mobile operators and came to the conclusion that
the operators have not based their charges on a
reasonable profit percentage, as determined by the
Telecommunication Act. The opinion of the Communications
Board is that lower interconnection charges would improve
the quality of mobile calls made from abroad to Estonia,
and would lead to lower retail rates. As a result, on 31
January 2003, AS EMT announced its intention to reduce
the termination fee, starting 1 March 2003, from the
current 3.06 EEK/min to 2,90 EEK/min, and the discounted
termination fee from the current 2,80 EEK/min to 2,75
EEK/min.
On 24 April 2001, the Competition Board issued a precept,
based on the Competition Act, prohibiting
AS Eesti Telefon from levying a per-minute rate of 34
senti (cents) at peak time, 28 senti at off-peak time,
and 14 senti at night for voice calls in its network. The
Competition Board thereby instructed AS Eesti Telefon to
levy rates lower than those which it had established on 1
April 2001. But AS Eesti Telefon is of the opinion that
the basic price of 14 to 34 senti, for calls within the
network, is cost-based. Therefore, AS Eesti Telefon
disagreed with the precept of the Competition Board, and
contested it in court in May 2001. The first and the
second level courts made their decisions in favour of AS
Eesti Telefon, and the Competition Board appealed to the
Supreme Court, which, on 18 December 2002, annulled the
earlier judgments and forwarded the case to the
Administrative Court for revision. The Supreme Court
found that the precept of the Competition Board,
regarding minute rates of the voice communication
services within a network, is inadequate for making the
final judgment. The Administrative and the District Court
had, according to the Supreme Court, not assessed all
items of available evidence. The Supreme Court considered
it necessary for the Administrative Court to use the
assistance of the Communications Board when revising the
case.
Information to the Shareholders
The Annual General Meeting of Eesti Telekom shall be held
on 22 May 2003, at 1.00 p.m. at Vanalinnastuudio (Sakala
3, Tallinn). The 2002 Annual Report and resolution
projects are available for all shareholders on Internet
page <a href='http://www.telekom.ee' target='_blank'>http://www.telekom.ee</a> and in the office of AS Eesti
Telekom at Roosikrantsi 2, Tallinn, starting 29 April
2003, on working days, from 10.00 a.m. to 2.00 p.m.
Any inquiries regarding the General Meeting can be made
by phone: +372 6 311 212, or by e-mail:
mailbox@telekom.ee.
AS EESTI TELEKOM AND SUBSIDIARY COMPANIES
INCOME STATEMENT
Financial statements are prepared in thousands of
Estonian kroons (EEK)
3 mths to 3 mths to 2002
31 March 31 March Restated
2003 2002
Restated
Revenues
Net sales 1,101,637 1,042,106 4,467,311
Other revenues 4,733 6,650 91,737
Total revenues 1,106,370 1,048,756 4,559,048
Operating expenses
Change in work-in- 759 939 864
progress
Capitalized self- 2,149 1,757 65,384
constructed assets
Materials, (333,021) (1,503,759)
consumables, (314,690)
supplies and
services
Other operating (102,249) (434,844)
expenses (98,511)
Personnel expenses (127,797) (513,005)
(122,760)
Other expenses (6,383) (42,786)
(8,673)
Total operating (566,542) (541,938) (2,428,146)
expenses
Profit from 539,828 506,818 2,130,902
operations before
depreciation
Depreciation and (228,445) (256,480) (1,000,468)
amortisation
Profit from 311,383 250,338 1,130,434
operations
Financial income / (729) (2,214) (5,153)
(expenses) from
subsidiaries and
associates
Other net financing 8,245 2,471 6,443
items
Profit before tax 318,899 250,595 1,131,724
Income tax on (279,816) - (91,298)
dividends
Net profit for the 39,083 250,595 1,040,426
period
Earning per share
Basic earning per 0.28 1.82 7.57
share (in kroons)
Diluted earning per 0.28 1.82 7.57
share (in kroons)
AS EESTI TELEKOM AND SUBSIDIARY COMPANIES
BALANCE SHEET
Financial statements are prepared in thousands of
Estonian kroons (EEK)
31 March 31 Dec 31 March
2003 2002 2002
ASSETS
Non-current assets
Property, plant and 2,492,653 2,673,673 2,868,804
equipment
Goodwill 2,540 3,687 12,363
Licenses, patents and 34,516 38,853 33,698
trademarks
Investments in 21,967 22,696 15,726
subsidiaries and
associates
Other investments 2,710 2,710 2,758
Other non-current 2,017 2,048 5,773
assets
Total non-current 2,556,403 2,743,667 2,939,122
assets
Current assets
Inventories 101,057 93,428 113,116
Trade receivables 421,550 430,330 441,448
Other receivables 189,699 210,970 153,507
Cash and cash 1,372,707 963,043 757,751
equivalents
Total current assets 2,085,013 1,697,771 1,465,822
TOTAL ASSETS 4,641,416 4,441,438 4,404,944
EQUITY AND
LIABILITIES
Equity
Issued capital 1,373,833 1,373,833 1,373,833
Reserves 447,348 447,348 447,348
Translation reserve (34) (25) (1)
Retained earnings 2,078,979 1,038,553 1,794,170
Net profit for the 39,083 1,040,426 250,595
period
Total equity 3,939,209 3,900,135 3,865,945
Non-current
liabilities
Interest-bearing 19,681 19,761 37,773
loans and borrowings
- due after one year
Current liabilities
Trade payables 124,685 244,850 165,033
Other current 179,499 196,134 177,978
liabilities
Tax liabilities 343,509 28,553 58,022
Interest-bearing 22,380 35,706 87,264
loans and borrowings
- due within one year
Provisions 12,453 16,299 12,929
Total current 682,526 521,542 501,226
liabilities
TOTAL EQUITY AND 4,641,416 4,441,438 4,404,944
LIABILITIES
AS EESTI TELEKOM AND SUBSIDIARY COMPANIES
CASH FLOW STATEMENT
Financial statements are prepared in thousands of
Estonian kroons (EEK)
3 mths to 3 mths to
31 March 31 March
2003 2002
Restated
Operating activities
Profit operations 311,383 250,338
Adjustments for:
Depreciation and amortisation 228,445 256,480
(Profit) / loss from sales (849) 2,477
and write-off of fixed assets
Operating cash flow before 538,979 509,295
movements in working capital
Change in current receivables 29 375 (50,371)
Change in inventories (7,629) (8,012)
Change in current liabilities (105,773) (73,661)
Cash generated by operations 454,952 377,251
Interest paid (231) (1,478)
Net cash from operating 454,721 375,773
activities
Investing activities
Purchase of property, plant (42,819) (79,808)
and equipment
Purchase of licenses (390) (662)
Proceeds from sales of 1,851 7,709
property, plant and equipment
Loans granted (217) (50)
Cash receipt from repayment 24 19
of loans
Interest received 9,865 2,195
Net cash used in investing (31,686) (70,597)
activities
Financing activities
Proceeds from long-term - 30
convertible debt
Repayment of long-term (3) -
convertible debt
Proceeds from nonconvertible 240 621
long-term debt
Repayment of nonconvertible (2,007) (1,777)
long-term debt
Repayment of long-term (11,636) (11,636)
borrowings
Net cash used in financing (13,406) (12,762)
activities
Net increase in cash and cash 409,629 292,414
equivalents
Cash and cash equivalents at 963,043 464,217
beginning of year
Effect of foreign exchange 35 1,120
rate changes
Cash and cash equivalents at 1,372,707 757,751
end of period
Hille Võrk
Financial Manager
6 272 460
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